Precious Metals: Gold and Silver
Why you ask?
The world monetary system used to be backed by gold. If you had enough currency, there was a way for you to redeem it for gold. If you felt your currency was losing its purchasing power to inflation, you could exchange it for another more stable currency in a neighboring country or for a precious metal such as gold or silver.
In the mid 1900s, the nations of the world agreed to tie their currencies’ value to the US dollar. Why? After their war spending, no nation had a significant amount of gold left. They didn’t want each other’s worthless currency however, they did want to trade with each other.
In contrast, the US dollar was backed by gold. The US had accumulated the biggest share of the world’s investment gold during World War II . Tying to gold through the US dollar was a compromise that helped nations feel confident about doing business together again.
On August 15, 1971, President Richard Nixon announced that the United States would no longer convert dollars to gold at a fixed value, thus completely abandoning the gold standard. The U.S dollar was now backed by nothing.
He made this change because foreign countries being paid in U.S. dollars grew skeptical because the U.S. Treasury was printing more and more money to cover their debts (doesn’t this sound familiar?), and they began to exchange their dollars directly for gold and therefore depleting most of the U.S. gold reserves.
The vault was being emptied because the government was importing more than it was exporting and also because of the costly Vietnam War. And as their economy grew, they were importing more and more oil.
In reality, the U.S. was starting to go bankrupt and could not pay its bills as long as their bills were to be paid in gold. By freeing their dollar from gold President Nixon created a way for them to print its way out of debt.
Thanks to President Gerald Ford, in 1974 he signed legislation that permitted Americans again to own gold bullion.
As more and more money was printed in each decade, over time the value of their dollar began to decrease and the prices of goods and assets went up.
Everyday debt by the middle-class also took off. Most recently in the last few years, credit cards were and are being given out by the banks freely, and money was flowing freely.
People started using their homes for equity loans to go on expensive vacations, buying not one but two SUV’s etc., and the party was on.
House mortgages were being given out freely too, to people who really couldn’t afford to make the mortgage payments.
And because they couldn’t make their payments, the Banks got into trouble and their debt grew…and then the banks themselves started to go bankrupt, and this was not limited to the U.S.A., this spread throughout the globe.
So governments throughout the world started bailing out the banks…by printing even more money to do so.
This became known as the Subprime Crisis.
And as economies around the world have been failing, fear of deflation is real and Trillions of dollars by governments have been created & spent to be used as “stimulus”, to hopefully re-ignite their economies.
The Federal Reserve, and other central banks around the world, have printed unprecedented amounts of currency.
In fact, this is the definition of monetary inflation – the creation of money without the corresponding creation of assets.
This is known as Fiat Currency.
As economies grow and more assets are created, more currency is required to keep the wheels of commerce turning.
However, when more currency is created than assets, the result is monetary inflation. The Federal Reserve Bank of the United States has created some three trillion dollars in the past six years, even though the U.S. economy actually shrunk.
And even when the government adjusts the CPI measurement again, more people will begin to realize we’ve been duped.
When the official U.S. inflation level gets into the high single digits, say around 8%, the U.S. equity markets will have a tough time. Many will know by then that U.S. treasuries are no longer safe.
Those who do will turn to precious metals; gold and silver.
This fiat currency is funny money, and eventually becomes worthless, like used toilet paper.
But it took just 2 years, 2007-2009, to double that amount to over $1,700 billion in circulation – and money is still being printed through a vehicle called Quantitative Easing.
And because of over-supply, the U.S. dollar is being deflated.
So where is the money investment flowing to?
Today, gold and silver remain the commodities that are internationally accepted as money. This is the current wealth cycle.
And supply of silver has dramatically gone down. This is because silver is consumable, it is used in such things as cell phones, computers, light switches, and reflectors in mirrors.
And the Chinese, Russian & Indian people are now allowed to invest in gold and silver which adds more demand for them. In fact in the past, only 10% of the Worlds population were once allowed to buy gold and silver.
Now 90% of the population can purchase these precious metals. This adds tremendous more demand.
Theses factors add up as gold and silver precious metals Investment the right place to invest your money.
Never before in history have all the world currencies been Fiat Currencies at once. There is no other place to run to, to protect your “Dollar Wealth’, as in reality governments are confiscating your wealth, buy printing more and more dollars, which is going to cause high inflation.
This could be the greatest opportunity in mankind, because this is possibly the greatest Wealth Transfer in man-kind.
In 2003, gold prices were $300 an ounce. In 2012, prices were pushing $2000 an ounce, and Silver had hit almost $50 an ounce.
And we could be still only at the beginning of this massive Bull run, in both Gold and Silver.
Two things I believe every investor should do:
2: Buy physical gold and silver and take possession of it (or have it stored at a third party depository).
Written by Nick Barisheff, who is one of the world's leading authorities on gold, $10,000 Gold explains why the price of gold will continue climbing to $10,000/ounce and beyond in the years to come.
This book provides invaluable advice on protecting money by putting it into the safest asset class on earth, Gold and Silver.
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